The won-dollar exchange rate has fallen to the 1,300 range, complicating calculations for U.S. stock investors. While the decline in the exchange rate poses a foreign exchange loss burden for existing investors, it presents an opportunity for new investors to secure more dollars with the same amount of won. How should investors approach U.S. stocks during this period of declining exchange rates?
According to the Korea Securities Depository's securities information portal, Saveuro, domestic investors net purchased $421.79 million in U.S. stocks from the beginning of this month through the 15th. This is a decrease of about 30.6% compared to the $674.4 million net purchase during the same period last month. As the won-dollar exchange rate has dropped to the 1,300 range, changes in the investment flow of existing investors are becoming apparent.
The strengthening of the won has a dual impact on U.S. stock investors. For an investor holding $10,000 worth of U.S. stocks, even if the stock price remains unchanged, a drop in the exchange rate from 1,500 won to 1,300 won reduces the won-denominated value from 15 million won to 13 million won. This means that even without any profit or loss in dollar terms, the decline in the exchange rate results in a 13.3% decrease in the valuation.
Conversely, for those investing 500,000 won monthly in U.S. stocks, the drop in the exchange rate increases their dollar purchasing power. When the exchange rate is 1,500 won, 500,000 won can buy about $333, but if the rate drops to 1,300 won, it can secure about $385. This represents an increase of approximately 15% in the dollars obtained for the same investment amount.
Park Sang-hyun, a researcher at iM Securities, stated, "As domestic investors feeling fatigued from the volatility in the domestic stock market shift towards U.S. stocks, the decline in the exchange rate may further encourage this trend. The reduction in currency exchange burdens will act as a catalyst for so-called 'overseas stock investors.'"
New investors entering the U.S. stock market during this period of declining exchange rates should consider the risks associated with exchange rate fluctuations. It remains uncertain whether the won's strength will continue until the end of the year. Kim Yu-mi, a researcher at Kiwoom Securities, predicts, "In the short term, the won-dollar exchange rate may fall to the low 1,300s due to dollar weakness and improved supply and demand, but further declines will be limited, and by the end of the year, it may rebound to the low 1,400s as it seeks a balance level."
Therefore, new investors might consider exchanging their investment funds over a period rather than all at once to mitigate the impact of exchange rate fluctuations. A financial investment industry official noted, "As the trend of declining exchange rates is expected to continue for the time being, it may be relatively stable to monitor the situation and appropriately divide the investment funds rather than investing all at once."
* This article has been translated by AI.
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